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The Costs and Solutions to the Construction Crisis



The month of August unfolded with further attempts from the state and federal governments to solve the crisis of Australia's construction industry, as well as increasing amounts of research released indicating the pervasiveness and extent to which poor regulatory oversight has impacted current homeowners and buildings.


How bad is it and how much will it cost to fix it?


A study conducted by Deakin University's Nicole Johnston and Griffith University's Sacha Reid analysed 212 building audit reports. They found that of the reports analysed, there were a total of 3227 building defects—or, 14 defects per building on average. Across Australia, 85% of new buildings had at least one defect. New South Wales had the highest percentage of buildings with at least one defect at 97%, followed by Victoria with 74% of buildings identified as having at least one defect.


More than 40% of defects were related to cladding; 13.26% to fire protection; 11.46% to waterproofing; 8.58% to roof and rainwater disposal; and 7.25% were structural defects. Johnston and Reid note that these defects often required costly and invasive remedial works, thus causing homeowners a great deal of difficulty in pursuing options for the rectification of those defects.


Indeed, in cases like this, it often falls upon property owners to rectify the problems, pointing at a lack of consumer protection in the residential property industry. This has been an ongoing issue for years, though it was only with the recent high-profile coverage of the Opal Tower and Mascot Towers (among other incidents) that a deeper investigation was undertaken which revealed the extent of he problems faced by households in purchasing their own homes.


Financial research and comparison group Mozo aimed to delve into these issues. Mozo conducted a national survey of over 1,000 property owners between July and August 2019. They found that 'most new and newly renovated apartment and homeowners surveyed have been plagued by defects that have cost them [on average] $6,434 and $5,839 respectively'. Of those surveyed, 74% of apartment owners paid up to $5,000 for repairs—however, 4% paid more than $50,000 each. 68% of homeowners paid up to $5,000, with 5% paying more than $20,000 each.


The final results calculated by Mozo estimated total costs for repairing defects within the home at a staggering $10.5 billion. Of the types of defects seen, 20% of apartment owners indicated that the actual size of their apartment differed from the plan, and another 8% complained that the builder changed the finishes during construction.


Mozo property expert Steve Jovcevski places the blame on the construction boom which 'saw some developers and builders cut corners to meet demand coupled with the weakening of regulatory oversight [that] has seen defects rain down on homeowners'.


How did it get to this point?


Broadly, Bronwyn Weir, co-author of the Shergold-Weir report, places the blame on 'a lack of competency, and sometimes, a lack of integrity' within the building industry. Investigation into the issue has highlighted several pain points in the construction process.


The first relates to the widely-used design & construct model, which presents itself as an alternative method to the traditional project delivery process. Under this model, 'the contractor takes responsibility for both the design and construction of the project based on a concept and requirements specified by the owner'. This often results in a more streamlined approach.


However, building defects consultant Ross Taylor observes instances where developers have contracted a well-known architect at the concept stage, and once sales had been made, switched over to contracts with unqualified architects and draftsmen who become responsible for the mpre technical side of the planning process. Conversely, private certifiers have laid the blame on the system, which requires them to only visit the site for major milestones or check the bare minimum in many instances.


An example is structural issues like that observed in the Opal Tower and Mascot Towers incidents. Adam Mainey, Director of Sydney-based Concise Certification, stresses that 'problems related to structural components of the building which are designed and certified by engineers are not required by law to be inspected by certifiers - principal or municipal.


What has the government been doing to rectify the problem?


In the beginning of August, it was announced that Dan O'Brien has been appointed to head Cladding Safety Victoria, the agency that currently oversees the $600 million cladding rectification fund. In his new role, O'Brien will be responsible for managing the CSV funding, as well as working with owners corporations to ensure building safety and compliance with regulations.


On 27 August 2019, the Professional Engineers Registration Bill 2019 passed the upper house at Parliament.

The bill requires those 'performing work in structural engineering, civil, mechanical, electrical or fire safety engineering [...] to be registered unless they are either working under supervision of a registered engineer or are performing work which accords to a prescriptive standard'.

The registration will be awarded by the Building License Authority, and it represents an attempt to implement one of the recommendations from the Shergold-Weir report which addresses the need for a registration system for building practitioners.


Upon passing, the bill will now enter a process to develop regulations that complement the legislation. This process is likely to take several months, after which engineers will be required to register with the Building License Authority.


However, the bill was met with voices of opposition from the Liberal Party. Shadow Treasurer Louise Staley argues that the bill imposes additional costs on engineers while only paying lip-service to safety issues that need to be remedied. She reminds that Victoria already has a licensing scheme for registration of building practitioners with the Victorian Building Authority.


Furthermore, Staley observes that Queensland also has a registration scheme similar to the one which just passed in Victoria, yet the state has seen its fair share of problems in cladding as well. Staley is also critical of the fact that the bill only targets engineers, asserting that there should be 'proper and effective regulation of all building professionals including architects, engineers, surveyors and builders, not the recasting of a Bill from the last Parliament reintroduced as the solution'. (ET)

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